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How to remove Pattern Day merchant status

Day Trading is defined as the buying and selling of the same security within the same trading day. So if you buy 100 shares of AAPL at 9:00 am and sell 100 shares of AAPL at 2:00 pm, you have just executed a daily trade. Once you have executed at least four daily trades within five consecutive business days, your brokerage firm will label your account as a “PDT” or Pattern Day Trader.

Being labeled a PDT isn’t necessarily a problem unless you have less than $30,000 in your account, based on the company minimum. The legal minimum set by the SEC is $25,000, but it is up to the broker’s discretion to raise that amount. If you are considering becoming a day trader, contact your brokerage firm to determine minimum account balance restrictions.

If you are labeled as a Pattern Day Trader and you do not have the minimum in your account on the day you executed your fourth day trade, your broker will send you an equity call asking you to make a deposit to increase your account to the stated minimum. If you don’t have the funds and this is your first time being labeled a PDT, simply send your brokerage firm an email or letter stating that you don’t have the funds to deposit into your account and that you intend to reduce the cessation or your daily business activities in the future. Then request that your PDT designation be removed along with any holds that have been placed on your account. Most companies will respond positively to this request as they have a unique exemption policy.

You may even be able to call a service representative to confirm the process of removing your PDT status, as all brokerages’ procedures are different. If you can, try to send an email and not a paper letter to get up and running as soon as possible.

This would be a good example of a request to remove your PDT status:

“Thank you for the notification of my patron day trader status. I understand the restrictions that come with being a PDT and since I do not have the capital to maintain my capital at $30,000 or more, I would like to state that I will reduce my day trading activities significantly by future and would like my coding as a Pattern Day Trader removed. Also, if any blocks or holds have been placed on my account, please remove them so I can resume trading. Please notify me if I need to take any further action.”

If this is the second time you have been considered a PDT and you do not have the required minimum balance, another equity call will be sent to you. If you are unable to increase your account balance, your margin will be restricted and you will only be able to long trade your account. You will not be able to short any security as short selling requires active margin. You may also have a hold on your account that will need to be removed. Call your broker to discuss your options.

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